Cautiously Beating the Market

The veteran value managers who launched the GoodHaven Fund two years ago have handily outpaced their benchmark despite keeping one-third of the portfolio in cash.

At a time when investors are favoring exchange-traded funds over equity mutual funds, it's not easy starting a new mutual fund. GoodHaven Fund (ticker: GOODX) ranks as one of the industry's better start-ups. It had assets of $476 million at the end of June, up from $224 million in late 2012, buoyed by strong inflows.

Its managers, Larry Pitkowsky and Keith Trauner, worked for about a decade with Bruce Berkowitz, the manager of the Fairholme Fund, before striking out on their own and starting GoodHaven in April 2011. The...